Identifying Potential Competitors (With Diagram)

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1. Market expansion:

Perhaps the most obvious source of potential competitors comes from firms operating in other geographic regions or in other countries. Vodafone, the largest mobile phone company in the world, entered India by acquiring Hutch and expanded its presence in the subcontinent. Airtel, the market leader is now experiencing the heat of competition and reviewing competitors’ strategies on a daily

2. Product expansion:

Sony, the global leader for electronic audio, video and musical systems, has expanded into the booming PC industry, thus exploiting a common market. It has moved into the laptop segment under the brand name VAIO, which takes advantage of technological and distribution strengths of Sony.

The company identified that most of the laptop users are young (below 28 years in India) and love to view films and songs, videos, photos and images with better audio and video image quality. So the company came up with Inter Video Win DVD for VAIO laptops with new added features which are superior to Windows Media Player and in line with company’s global image and reputation in the electronics field.

3. Backward integration:

Customers are another potential source of competition Ford Motors bought dozens of manufacturers of components during its formative stages of ford Ikon in their maiden Indian operation. This helped the company save nearly 30 per cent of the production cost in labour and components.

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This move also proved beneficial to them in the booming Indian passenger car market (India is considered as the second fastest growing market in the world after China). As a result, a global car has finally been rolled out of an Indian factory by the third largest manufactures of cars in the world.

Reliance Fresh, ITC, Coca-Cola and Pepsi are effectively using this method for sourcing their fruit and vegetable requirements for their retailing (F&V of Reliance Fresh, Lay’s of Pepsi and Bingo of ITC) and fruit juice (Minute Maid-Pulpy orange of Coca-Cola) manufacturing under the name of contract farming. Major can users such as Campbell Soup have integrated backward, making their own containers.

4. Forward integration:

Suppliers are also potential competitors. In the PC industry Intel image is an important marketing ingredient. Several PC makers highlight the tact that their machines are seen by a powerful and reliable processor. Intel started advertising its Centrino Wi-Fi technology during the booming laptop sales for meeting the emerging needs of business executives and laptop users.

So their latest processor Intel Core 2 Duo Processor T 5300 (1.73 GHz) became a powerful marketing tool for a new brands like Sony VAIO laptops. Likewise Linux and Microsoft corporations offered their operating system as an inbuilt option for the manufactures of Dell and Sony laptops and PCs. So suppliers, believing they have the critical ingredients to succeed in a market, may be attracted by the margins and control that come with integrating forward.

5. The export of assets or skills:

A current small competitor with critical strategic weaknesses can turn into a major entrant if a firm that can reduce or eliminate those weaknesses purchases it. When Blackberry GSM handsets came up in the market with the latest invention-powerful Bluetooth technology and mobile Internet service connectivity-the market leader Nokia had no option but to purchase the software for its advanced mobile sets (Nokia series starting from 6 and above).

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Even though one m three GSM handsets used in the world belongs to Nokia, the technology always drives the sales of GSM handsets world over. Hence Nokia has no option other than to buy the software for defending its market position. As Figure 5.3 indicates, competitive actions are influenced by six elements.

The size and growth rates and sales and market share are indicators of the vitality of a business strategy. The maintenance of a strong market position or the achievement of rapid growth usually reflects a strong competitor (or strategic group) and a successful strategy .In contrast, a deteriorating market position can signal financial or organizational strains that might affect the interest and ability of the business to pursue certain strategies.

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After size and growth comes profitability. A profitable business will generally have access to capital for investment unless it has been designated by the parent to be milked. A business that has lost money over an extended time period or has experienced recent sharp decrease m profitability may find it difficult to gain access to capital either externally or internally.

There are several points that emerge from identifying strategic groups. The first is that the height of the barriers to entry and exit can vary significantly from one group to another The second is that the choice of a strategic group determines which companies are to be the principal competitors.

Recognizing this, a new entrant would then have to develop series of competitive advantages to overcome, or at least to neutralize the competitive advantages of others in the group. For instance, Vodafone came up with TV commercial a new le of the ad, features a couple with the husband wearing a ghost mask trying to frighten the wife who remains unaffected and responds Ho gaya indirectly ridiculing the offers of competitors in the mobile phone market.

Some visible characteristics for identifying strategic groups include the following:

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Size and relative share, the extent of product or service diversity, the degree of geographic coverage, the number and type of market segment served, the type of distribution channels used, the branding philosophy, product or service quality, market position (leader defender or follower), technical position (leader, or follower), R&D capability, performance, cost structure and behaviour, patterns of ownership, organizational culture and the degree of vertical and horizontal integration and market reputation.

There is a general rule in the US that the top 10 companies occupy 90 per cent of the market share and the top three tap more than 60 per cent of the market. So in order to survive in the market a newcomer must aspire her place in the top five within three years of its existence. This is also found true in India in the mobile phone, aviation, brokerage, banks, insurance and retailing sector.